Deposit/Return System for Alcoholic

and Non-Alcoholic Beverage Containers

 The Works and Utilities Committee recommends that:

(1)City Council reiterate its request to the Province of Ontario to permit province-wide implementation of a deposit/return system;

(2)the Province of Ontario be requested to pass enabling legislation to permit deposit/return in the City of Toronto; and

(3)that the Provincial opposition parties be advised of such action.

The Works and Utilities Committee reports, for the information of Council, having:

 (1) requested the Commissioner of Works and Emergency Services and the City Solicitor to:

(i)develop a proposal for such enabling legislation;

(ii)continue their investigation to determine whether a deposit/return system could be implemented without enabling legislation;

(iii)submit a report directly to Council for its meeting on April 16, 1998, on legal remedies for the implementation of a deposit/return system; and

(iv)submit a report to the Committee at its next meeting, scheduled to be held on April 22, 1998, on measures that can be undertaken with respect to licensing at the retail or distribution level;

(2)requested that Mr. Robert Power, solicitor with the firm of Outerbridge, Miller, Sefton, Willms and Shier, be invited to appear before the Committee at its next meeting; and

(3)noted that appropriate arrangements will be made related to the organization of an event on Earth Day, April 22, 1998, or in Earth Week, respecting deposit/return systems.

The Works and Utilities Committee submits the following report (March 18, 1998) from the Interim Functional Lead for Solid Waste Management:

Purpose:

To provide City Council with sufficient information to decide whether the implementation of deposit/ return for wine and spirit and other beverage containers is appropriate.

Funding Sources, Financial Implications and Impact Statement:

Adoption of this report will have no immediate influence on the costs of the City=s waste management system. However, if the volume of waste managed under the system is reduced with the implementation of a deposit/return system for recyclable or reusable items, the annual cost of the City=s waste management system is estimated to be lower. Deposit/return for only wine and spirit containers is estimated to reduce the cost of the City=s waste management system by approximately $1,000,000.00 per year following full implementation. Comprehensive deposit/return for all alcoholic and non-alcoholic beverage containers is estimated to reduce the cost of the City=s waste management system by approximately $4,750,000.00 per year following full implementation. These figures are based on 1997 actual expenditures and revenues, however, they are applied to preliminary estimates of recyclable materials in the waste that is landfilled.

Recommendation:

It is recommended that this report be received for information, and be considered in conjunction with the confidential report submitted by the City Solicitor.

Council Reference/Background/History:

Previous resolutions of the former City of Toronto and Metropolitan Councils and their committees, which are background to this report, are summarized in Appendix A attached.

At its meeting of January 14, 1998, your Committee requested that a report be submitted on:

A(i)the implementation of a deposit/return system for all beverage, wine and spirit containers in the City of Toronto; and

(ii)the implications of withdrawing the collection of such materials from the Blue Box Program.@

At its meeting of February 4 and 5, 1998, City Council adopted the recommendation of your Committee that:

A(A)(1)... in addition to the Council direction to staff of September 24 and 25, 1997, by the adoption of Clause No. 4 of Report No. 12 of The Environment and Public Space Committee, as amended, the Commissioner of Works develop a plan to mandate a deposit/return system being established for wine and spirit beverage containers sold in the new City of Toronto;

(2)... the Solicitor, in consultation with the Commissioner of Works, report on any legal remedies that may be used to help establish a deposit/return system for wine and spirit beverage containers sold in the new City of Toronto;

(3)... the Commissioner of Works= and Solicitor=s reports be presented to the appropriate Committee of the new City of Toronto Council at the first available opportunity; and

(4)... the Commissioner of Works pursue this matter with his peers across the Province of Ontario;

and further, that the appropriate City officials be authorized and directed to take the necessary action to give effect thereto;

(B)that the Province of Ontario be requested to:

(1)immediately mandate a deposit/return system for all beverage, wine and spirit containers; and

(2)reimburse the City of Toronto in the amount of approximately $2.2 million for the costs of handling Liquor Control Board of Ontario containers; and

(C)the Association of Municipalities of Ontario be requested to support the aforementioned recommendations with respect to deposit/return systems.@

(Clause No. 1 of Report No. 1 of The Works and Utilities Committee.)

City Council, at its meeting of February 4 and 5, 1998, amended the above-mentioned clause by adding the following:

AIt is further recommended that the Interim Functional Lead for Solid Waste Management, in responding to the direction of the Committee, be requested to separate the issue of wine and spirit containers from the issue of all other beverage containers when reporting thereon to the Committee.@

At its meeting on February 11, 1998, your Committee reviewed a report dated January 28, 1998, from my Department entitled ADeposit/Return System for Wine and Spirit Containers in the City of Toronto and Implications of Withdrawing Collection of These Materials in the Blue Box Program@, in which it was noted that the Waste Management Transition Work Group of the Works and Transportation Service Review Team is currently assessing, in detail, information previously developed by the various parts of the City regarding the issues of product stewardship, blue box funding and beverage container deposit/return so as to develop a consistent set of data that reflects information developed by the constituent components of the City, and that the information developed by this Group will be before your Committee at its meeting of March 25, 1998.

Executive Summary:

This report addresses the implications for the City of instituting a comprehensive deposit/return system for all beverage containers excluding milk containers. In this report, wine, spirit and beer beverage containers will be referred to as alcoholic beverage containers, and other beverage containers will be referred to as non-alcoholic beverage containers. It is also assumed that beverage containers returned under a deposit/return system will be recycled, and that the rate of return of containers under a deposit/return system is 85 percent of the total sales. Refill of containers is not specifically addressed in this report. The estimated quantities and costs in this report are preliminary and subject to refinement as the accounting systems of the constituent municipalities of the City are brought to a common basis, and as additional information is developed regarding generation rates for recyclable materials.

Comprehensive deposit/return for all beverage containers is estimated to decrease the City=s overall waste management costs by approximately $4,750,000.00 per year, increase waste diversion from landfill measured by weight from 15 percent to 17.4 percent (excluding organic yard waste diversion of 59,000 tonnes per year, or approximately 7 percent) and reduce the amount of material landfilled in the City by approximately 24,000 tonnes per year, or an approximate diversion increase of 2.5 percent. Carbon dioxide emissions would be reduced by approximately 34,000 tonnes per year and would contribute to 0.6 percent of the City=s goal of greenhouse gas reduction, based on the Metro AState of the Environment@ Report, 1995. The estimated flow of alcoholic and non-alcoholic beverage containers to landfill and virgin materials required, with and without deposit/return, are shown in Figures 1 and 2.

The report concludes that deposit/return for alcoholic and non-alcoholic beverage containers will be financially beneficial to the City, will significantly improve the performance of the City's waste management system and will strengthen the financial and operational stability of the blue box and other City waste diversion systems.

Comments and/or Discussion and/or Justification:

Method of Data Gathering and Analysis:

The data in this report, with the exception of greenhouse gas (GHG) emissions, is a result of analysis carried out by a staff team with representation from most of the former Area Municipalities and the former Metro Works Department. The overall analysis is the result of a combined effort of this subgroup. The staff team used an independent financial auditor as a reference in the development of their costing model and to review the findings presented in this report. However, a detailed audit of the costs was beyond the scope of the involvement of the financial auditor. The data presented in this report is the best information available at this time. It is emphasized that the issue of cost allocation for waste management activities is complex and that the costs and quantities estimated in this report are derived from the constituent parts of the new City of Toronto with seven different accounting systems and seven different data management systems. The quantities of recyclable materials in garbage collected by the City are estimates utilized in the Preliminary Metro 3Rs Strategy prepared by the Metro Works Department, dated November 28, 1996.

Diversion and fixed cost assumptions:

All estimates of cost savings resulting from deposit/return shown in this report are based on 85 percent of all containers returned under a deposit/return system and 20 percent of the collection and transfer costs of recyclable materials being fixed and not related to volumes of recyclable materials collected and processed. In order to confirm the conclusions of this report, a sensitivity analysis was carried out using lower capture rates under deposit/return, higher fixed costs for collection and transfer and lower overall estimated generation rates for containers. This analysis resulted in a range of cost saving estimates up to 20 percent lower than shown in this report.

As a result of this sensitivity analysis, it is concluded that the costs and quantities shown in this report are realistic and representative of the best information available at this time, and that it is appropriate to make policy decisions based on this information. However, it is also emphasized, as noted above, that all estimates of costs and generation and diversion quantities are subject to further review and refinement. In this report it has also been assumed that residents use their blue boxes to recycle beverage containers to a far higher level than they use the blue box to recycle other containers of the same material. This assumption was made to ensure that the estimated savings resulting from deposit/ return are not overstated.

In the report it has also been assumed that a deposit/return system will capture 85 percent of eligible materials from both the recycling and garbage streams of waste. It is likely that, under a deposit/ return system, most eligible containers subject to a deposit would be removed from the blue box where they are visible, but would not be removed from the garbage. Because we have estimated that the average net recycling cost for container materials is greater than garbage collection and disposal costs, the effect of these assumptions is to potentially understate savings resulting from deposit/ return. The above assumptions were made because there is no local information regarding actual set out of these types of containers in the blue box under a deposit/return system.

Analysis year for costs and implications for potential operational change:

Costs in this report are estimated using the City waste management system expenditures and revenues for 1997. System costs will change as new disposal capacity and processing capacity are added. However, the cost changes for options shown in this report will also apply to future system costs.

Issues related to deposit/return:

Your Committee has requested that a report be presented which addresses a number of complex and interrelated issues. In order to clearly address these issues, the report is broken down into six sections as follows:

(1)Existing waste management costs and estimated waste management costs following a deposit/ return system;

(2)Implementation of deposit/return for wine and spirit containers and/or non-alcoholic beverage containers;

(3)Compatibility of deposit/return system with blue box recycling system;

(4)Responsibility for waste management costs;

(5)Funding support from the Province of Ontario for recycling programs; and

(6)Global greenhouse gas emission impacts.

(1)Existing waste management costs and estimated waste management costs following a deposit return system:

(a)Estimates of quantities in the existing recycling system and in the garbage:

The performance of the City=s existing recycling system can best be understood in considering the volumes of materials collected in the blue, grey and green box system and the amounts that are collected as garbage. In estimating these amounts, it should be noted that collected and processed quantities of recycled materials are known as a result of weighing under the City=s data management system. However, the total quantity of the same material types contained in garbage collected by the City is an estimate based on waste surveys and other information. This estimate is based on an analysis carried out and reported in the Preliminary Metro 3Rs Strategy prepared for the Metro Works Department, dated November 28, 1996. The estimates of large fractions of eligible recyclable waste, such as paper and glass, can be estimated with greater certainty than estimates of small fractions of waste, such as aluminum cans. The accurate estimation of high value materials in the waste stream, such as aluminum, is important in considering future waste management systems, and the level of resources that should be expended to recover such materials.

The quantities of garbage and recyclable materials described in this report do not include privately collected garbage and recyclable materials. However, the impact of deposit/return on greenhouse gas emissions from privately collected recyclable materials is assessed. It is estimated that approximately 940,000 tonnes of private sector waste is generated in the City, approximately 640,000 tonnes of which was delivered to our facilities, and approximately 300,000 tonnes of which was exported to other disposal and recycling facilities. Other data sources used in calculating the estimated quantities of materials used to conduct the analysis in this report include the Canadian Soft Drink Association (CSDA) website, the Recycling Council of Ontario and the Ontario Ministry of the Environment.

While there is little evidence to support the position that more beverage container waste is recovered through the blue box than other container waste, over the next several months staff will be attempting to determine with greater certainty the relative amounts of these various beverage and non-beverage containers which exist in the waste stream.

(b)Estimated impacts of deposit/return on costs and quantities of recyclable materials landfilled and associated benefits:

Table 1 attached shows the quantities of blue box materials that would be captured by a deposit/return system and the alcoholic beverage container and/or non-alcoholic beverage container quantities of the same materials that would not be landfilled in the City=s disposal system under a deposit/return system and the cost savings resulting from the removal of these materials from the recycling and landfill system. A deposit/ return system would also increase the City=s diversion rate by approximately 2.5 percent and reduce the total amount of landfill of beverage containers, as shown in Table 2.

As can be seen from Table 1 attached, based on current prices received for materials, deposit/return for alcoholic and non-alcoholic beverage containers is estimated to result in cost savings of approximately $4,750,000.00 per year and increase diversion from landfill by approximately 21,000 tonnes per year, based on a return rate of 85 percent for all beverage containers. The estimated cost savings shown in Table 1 are based on the avoided costs of not recycling and landfilling the various materials, of which alcoholic and non-alcoholic beverage containers are made. These cost savings per tonne of material are different from the average cost of recycling and landfilling, as shown in Table 3A.

For comparison, Table 3B shows estimated costs of the management of municipally collected waste based on market prices for fibre materials and the expected future cost of landfill disposal of approximately $50.00 per tonne. The estimated flows of alcoholic and non-alcoholic beverage containers, landfill and virgin material requirements each year are shown in Figures 1 and 2.

(2)Implementation of deposit/return for alcoholic and/or non-alcoholic beverage containers:

The City Solicitor will report separately to your Committee on any legal remedies that may be used to help establish a deposit/return system.

(3)Compatibility of deposit/return with blue box recycling system:

Under deposit/return for alcoholic and non-alcoholic beverage containers, the cost of the City=s waste management system would decrease by approximately $4,750,000.00 per year. Therefore, the City will have relatively more resources to support the remaining waste management programs. This should strengthen the blue box program and make it easier for the City to pursue other waste management approaches such as organics processing. This would achieve higher levels of diversion of City waste from landfill than would be the case for similar expenditure of City funds without deposit/return. This conclusion is supported by conclusions contained in a report (January 27, 1993) entitled ABottle Bills and Curbside Recycling: Are They Compatible?@, prepared by the United States Congressional Research Service, which states:

AStudies suggest that local governments would achieve a greater diversion of solid waste from curbside disposal at a lower cost per ton if both a bottle bill and a curbside collection program were in place.@

(4)Responsibility for waste management costs:

Much of the recent publicity regarding waste management costs has failed to address the issue of who should pay these costs. Waste management costs can be paid through municipal taxes, user fees or by the producer. Each of these options is reviewed below.

(a)Municipal Taxes:

The existing waste management system, which is largely funded through municipal taxes, has a net cost of approximately $77,000,000.00 per year and, based on the estimates shown in Table 4, could increase in cost to approximately $126,000,000.00 per year in 2002 with no increased waste processing capacity. A significant portion of the taxes that fund the system are paid by commercial businesses that receive no City waste management services (generally retail and office and industrial premises). Because there are no direct costs to the users for waste management services, there are no direct incentives to the users of the system to divert waste from landfill or to purchase goods that minimize waste management and environmental impacts. There are also no financial incentives for manufacturers to produce and market products that minimize waste management and environmental impacts.

On the other hand, the existing property and business tax funded waste management system results in a universal and cost-effective waste management system, for which the gross cost is currently about 10 cents per day, per person receiving service for collection, processing and disposal of all municipally collected waste.

(b)User Fees:

User fees result in the user paying the actual cost of waste management services. Such fees can range from a flat rate per residence to a weight based or per container fee. In many municipalities where user fees have been implemented, recycling is provided free, which results in increased recycling and reduced garbage disposal. As can be seen from Table 3A, recycling of container materials is more expensive than landfilling these materials; hence a shift towards increased recycling of many container materials will increase the cost of the waste management system and the total fees required.

Unless a municipal monopoly is maintained, private waste management operators may be able to offer waste management services (which may not include comprehensive recycling services) to residents at a lower cost than any user fees charged by the City. If residents transfer to service by private contractors, this could result in financial instability of a user fee based municipal waste management system, and contribute to a need to charge increased fees to the remaining users of the system or to reduce services provided. The actual introduction of user pay will also introduce a cost for collecting fees which will increase the cost of the waste management system.

In summary, user pay is likely to result in increased recycling. Increased recycling of container materials, other than aluminum, will result in increased costs to residents. User pay will also result in decreased municipal taxes charged to businesses. It could also result in financial instability of the existing comprehensive City waste management system.

(c)Producer Responsibility (Product Stewardship):

Under this system, the producer of a product is responsible for waste management costs either by designing the product such that it does not impact the municipal waste management system (as is the case for Ontario beer containers), or by contributing financially to the cost of the waste management system (as was formerly the case with Ontario Multi-Material Recycling Inc. (OMMRI)).

Deposit/return is a form of product stewardship. Full product stewardship encourages the producer to minimize the impacts of the products on the waste management system, and allows the producer to do this in an innovative and entrepreneurial fashion. This allows private sector creativity to minimize costs and product environmental impacts.

Product stewardship models can be bureaucratic, and it is important to design such systems to minimize bureaucracy and maximize the potential for innovation. Of course, the Aproducer@ does not actually pay for the cost of product stewardship: this cost is actually borne by the purchaser of the product as noted in the Executive Summary of this report. However, these increased costs may be lower than the reduced cost of municipal waste management, resulting in an overall saving to the consumer. Various studies have been produced to date with no conclusive evidence as to whether the net cost to the consumer increases or decreases under product stewardship.

The alcoholic and non-alcoholic beverage industries, with the exception of the Ontario beer industry, which currently manages its own containers, would encounter additional costs in managing the containers of their products under such a system. These additional costs have not been stated by the affected industries. However, the beer industry advised in 1997 that the net cost of the existing system of deposit/return for beer containers is approximately $40 million per year for Ontario or $7 million per year for beer sold in Toronto. In 1997, the beer industry sold approximately 1.8 billion containers. The net cost for managing each beer container is approximately 1.8 cents. Approximately 315 million beer containers are marketed per year in Toronto. Excluding beer, approximately 43 million glass alcoholic beverage containers are marketed in the City by the LCBO, along with approximately one million PET alcoholic beverage containers. Additional alcoholic beverage containers are marketed by other wine stores. Approximately 600 million non-alcoholic containers are marketed each year in the City.

This report concludes that deposit/return for alcoholic and non-alcoholic beverage containers will be financially beneficial to the City, will significantly improve the performance of the City=s waste management system and will strengthen the financial and operational stability of the blue box and other City waste diversion systems.

(5)Funding support from the Province of Ontario for recycling programs:

While the Province of Ontario has provided substantial financial support to establish waste diversion programs, this financial support has diminished in recent years as the programs have matured. It may be reasonable to request the Province to allocate some or all of the Environmental Levy (approximately $37 million per year) on LCBO containers to municipal waste diversion programs, recognizing the impact that LCBO containers have on those programs. This would enable municipalities to bring waste diversion programs into a more financially sustainable position while the Province addresses in detail the potential for a Province-wide deposit/return system.

(6)Global greenhouse gas (GHG) emission impacts as a result of recycling versus new production of alcoholic and non-alcoholic beverage containers:

 Deposit/return systems are commonly used for both refilling containers and recycling of recovered materials. Information regarding the relative environmental merits of using deposit/ return for the refilling or recycling of containers is somewhat inconclusive. Recent evidence suggests that when comparing containers of the same materials, refilling containers approximately eight or more times has lower impacts than recycling containers. However, in estimating reductions of energy use and CO₂ emission reductions for the purpose of this report, it has been assumed that all recovered materials will be recycled rather than reused. Greenhouse gas reduction estimates are solely based on the amounts of material that will be recycled instead of landfilled under a deposit/return system.

 It is estimated that deposit/return for all alcoholic and non-alcoholic beverage containers will reduce the City=s contribution to global CO₂ production by 34,000 tonnes per year or 0.6 percent of the City=s GHG reduction goal based on diversion of container materials, other than glass from landfill to recycling, under deposit/return. This is summarized in Table 5 attached. This analysis excludes an estimate of greenhouse gas reductions for increased glass recycling because GHG reduction data for glass recycling was unavailable from the source document used in this calculation.

A report for the United States Environmental Protection Office entitled APreliminary Analysis: The Costs and Benefits of Bottle Bills,@ January 1995, states:

AElevated recycling rates due to bottle bills (*) reduce many types of air and water pollution including greenhouse gas emissions. One possible method of evaluation of these benefits, the system of evaluation developed in the Tellus Institute Packaging Study, suggests that the reduction in emissions would be worth $1.60 per capita annually. Most of the benefit is due to reduced power plant emissions resulting from the increase in aluminum recycling. Greenhouse gas emissions from bottle bills could amount to 1.74 million metric tons of carbon nationwide, again largely due to the increase in aluminum recycling.@

*The term Abottle bill@ legislation refers to deposit/return for drink containers in the United States.

The evaluation conducted by City staff also indicates that, of all subject materials, the elevated recovery of aluminum associated with overall increased material recovery under deposit/ return would result in the greatest contribution to reduced CO₂ emissions. Approximately 29,000 tonnes (85 percent) per year of reduced CO₂ emissions are estimated to result from increased aluminum can recovery.

As noted earlier, there is some uncertainty concerning the total quantity of aluminum and the total quantity of aluminum beverage containers in the municipally collected waste stream. However, because deposit/return systems are considered to be highly effective at removing subject materials from both publicly and privately collected waste, the benefits with regard to CO₂ reduction described above are likely to be achieved regardless whether the subject material is generated by individuals whose waste is collected either publicly or privately.

It is also important to understand that material volumes contribute to the generation of CO₂ emissions in the collection and tansfer components of waste management systems. For example, one collection vehicle can carry approximately seven tonnes of paper and, for each tonne of paper collected, approximately 4.4 litres of fuel are used and 12 kilograms of CO₂ are emitted. Two collection vehicles are required to carry approximately seven tonnes of blue box container materials, which result in the use of approximately eight litres of fuel, and the emission of approximately 22 kilograms of CO₂ (approximately 183 percent of the amount for the collection of a tonne of paper) for each tonne of blue box material collected. If the composition of blue box container materials changes, for example, by substituting lower density containers for higher density containers, then the number of collection vehicles required for the collection of a given weight of containers will increase, and hence, CO₂ emissions per tonne of material collected will increase. These potential reductions in CO₂ emissions resulting from deposit/return are not included in the estimates shown in Table 5.

Summary:

Under a deposit/return system for alcoholic and non-alcoholic beverage containers, it is estimated that the City=s diversion rate will increase by approximately 2.5 percent and annual waste management costs will decline by approximately $4,750,000.00 per year. Carbon dioxide emissions will decrease by approximately 34,000 tonnes per year, contributing up to 0.6 percent to the City=s goal of 20 percent greenhouse gas reduction.

Based on the analysis described in this report, there will be significant cost benefits to the City and environmental benefits in implementing deposit/return for alcoholic and non-alcoholic beverage containers. These benefits must be weighed against the increased costs and inconvenience to consumers that will result from the implementation of deposit/return for these containers.

Cntact Name and Telephone Number:

John Warren, Director of Operations and Sanitation

Toronto Community Council Area

Phone: (416) 392-1846; Fax: (416) 392-0396

E-Mail: Ajwarren2@city.toronto.on.ca@

 Appendix A

 Resolutions of the Former City of Toronto and Metropolitan Councils and Their Committees

 At its meeting of September 22 and 23, 1997, in considering Clause 97 contained in Report No. 11 of the City Services Committee, the former City of Toronto Council:

A1.Requested that the Commissioner of City Works Services, in consultation with the Metro Commissioner of Works and other area municipality Works Commissioners, determine the full system costs for managing non-refundable alcoholic and non-alcoholic beverage containers in the municipal solid waste stream, including the costs associated with garbage and recyclable material collection, transfer, marketing, and disposal of non-recovered beverage containers for the consideration of the Council of the new City of Toronto.

5.Endorsed, in principle, the action taken by North York City Council, supported the extension of the North York By-law to all beverage containers, and deferred passage of a by-law to impose recycling/disposal charges upon the retailers and producers of all beverage containers for the consideration of the new City of Toronto=s Council in 1998 and, in the meantime, instructed the appropriate City staff to consult with staff of the other Area Municipalities and Metro with respect to determining the costs of collection and disposal and monitoring the operation of any municipal by-laws coming into force before the end of 1998.@

At its meeting of December 10 and 18, 1997, the Metropolitan Council adopted the recommendation of the Environment and Public Space Committee:

 A(1)That in addition to the Council direction to staff of September 24 and 25, 1997, by the adoption of Clause No. 4 of Report No. 12 of The Environment and Public Space Committee, as amended, the Commissioner of Works develop a plan to mandate a deposit/return system being established for wine and spirit beverage containers sold in the new City of Toronto;

(2)that the Solicitor, in consultation with the Commissioner of Works, report on any legal remedies that may be used to help establish a deposit/return system for wine and spirit beverage containers sold in the new City of Toronto; and

(3)that the Commissioner of Works= and Solicitor=s reports be presented to the appropriate Committee of the new City of Toronto Council at the first available opportunity.@

(Clause No. 2 contained in Report No. 13 of The Environment and Public Space Committee, adopted by Metropolitan Council at its meeting of December 10 and 18, 1997.)

 Table 1

Estimated Impact of Deposit/Return (85% Capture)

on Recycling and Landfill Volumes and Costs

Based on 1997 Costs and Managed Volumes*

 *Includes materials managed in the City=s waste management system, excluding waste delivered to City facilities under private contracts and directly from agencies, boards and commissions.

Deposit/return impact based on 85 percent return rate for all beverage containers.

 Table 2

Estimated Impact of Deposit/Return (85% Capture) on City=s Waste Diversion Rate

For Municipally Collected Wastes

 *Excluding diversion of 59,000 tonnes of organic yard waste (approximately 7 percent waste diversion) and other organic waste diversion. As a consequence of excluding these items, this stated diversion rate is different from the different diversion rate shown in a separate report to your Committee regarding the City=s overall diversion of waste from landfill. Also excluding privately collected and privately delivered wastes and wastes from agencies, boards and commissions.

Table 3A

 Existing Cost of Recycling and Landfilling

(Based on 1997 Costs and Current Contract for Fibre Recycling)

 *Excluding composting and other diversion, and excluding privately collected, privately delivered wastes and wastes from agencies, boards and commissions.

 **Actual densities of recyclable materials and garbage in landfill will vary. Landfill cost is based on the average density for these materials. More analysis is required to identify the cost of landfill for each material.

 Table 3B

 Cost of Recycling and Landfilling

(Based on Current Market Prices for All Materials, Including Fibre, and Future Landfill Cost of $50.00 per tonne)

 *Excluding composting and other diversion, and excluding privately collected, privately delivered wastes and wastes from agencies, boards and commissions.

**Actual densities of recyclable materials and garbage in landfill will vary. Landfill cost is based on the average density for these materials. More analysis is required to identify the cost of landfill for each material.

***The estimated cost of landfill utilization in 1997 was $13.00 per tonne, which was a component of the $86.00 per tonne total cost for garbage collection and disposal. If landfill utilization is costed at $50.00 per tonne, the increase will be $37.00 per tonne, which increases total garbage collection and landfill cost to $123.00 per tonne.

      Table 4

 Estimated Financial Impacts of Increased Landfill Costs

and Decreased Revenues for the Sale of Fibre

on the City=s Waste Management Costs

 *Excludes costs and revenues from private waste disposal and cost of processing of compostable materials. The existing net cost of the waste management system including these items is approximately $77,000,000.00 per year.

 **The amount shown represents the current net annual revenue from the acceptance of commercial wastes at the City=s Keele Valley Landfill Site.

      Table 5

 Estimated CO₂ Equivalent Reductions

Resulting from Comprehensive Deposit/Return on

Alcoholic and Non-Alcoholic Beverage Containers

 *ECO₂ is the equivalent impact of CO₂ emissions for all gasses emitted in virgin material or recycling processing (including such activities as resource mining and transportation.)

The Works and Utilities Committee also submits the following communication (March 12, 1998) from the City Clerk:

City Council, at its meeting held on March 4, 5 and 6, 1998, adopted, without amendment, the following Motion:

 Moved by:Councillor Mihevc

Seconded by:Councillor Adams

AWHEREAS the Province may be considering the issues of deposit/return in this year=s budget due in April; and

WHEREAS the City has a tremendous interest in this matter and would benefit from a move from disposable to refillable beverage containers; and

WHEREAS a workshop or day long conference on Earth Day would be an opportunity for highlighting the issues and advancing the City=s interests;

NOW THEREFORE BE IT RESOLVED THAT the Chief Administrative Officer be given the authority to organize an event on Earth Day, April 22, 1998, or in Earth Week, to highlight the viability of deposit/return systems; and be requested to submit a report to the Works and Utilities Committee for its meeting to be held on March 25, 1998, on this proposal.@

The Works and Utilities Committee also submits the following report (March 19, 1998) from the Interim Functional Lead for Solid Waste Management:

Purpose:

To undertake an analysis of the actual costs of recycling and landfilling programs provided by the City of Toronto, and to compare these costs with other published information.

Funding Sources, Financial Implications and Impact Statement:

This report identifies current costs, and will have no impact on the City=s operational budget.

Recommendation:

That this report be received for information.

Background:

In January 1998, a number of articles were published regarding the City of Toronto=s recycling and landfill costs, and the numbers quoted were questioned by some people regarding their accuracy.

The Commissioner of Works and Emergency Services made a commitment to report to the March 25, 1998 meeting of the Works and Utilities Committee with a review of the costs of recycling and landfill. In order to address the costs associated with the recycling and landfill programs, it was necessary to create a staff team that had a member from each of the Works Departments of the previous seven municipalities. This committee has attempted to prepare more accurate estimates of the total quantity of recyclable materials in the municipally collected waste stream. This staff team has worked diligently and compiled a huge amount of raw data from which to identify costs for the existing recycling and landfilling programs. Staff were assisted in the exercise by an external consultant for KPMG who has advised an appropriate cost accounting for the program.

Discussion:

It has become very clear that trying to identify a single cost per tonne for recycling and landfilling is very misleading and can fluctuate considerably when we attempt to define the value of providing a program according to the net cost of operations. The cost of recycling and landfilling different materials varies significantly and is impacted by the density of the material, the collection processing and disposal costs of the different materials and, more importantly, the market value of any material sold. For example, materials such as newspapers which have a high density and high contract value under the existing contract have a low recycling net cost, whereas materials such as Polyethylene Terephthelate (PET) which have low density and low value per cubic metre of material collected and processed end up having a high recycling net cost per tonne. It has become clear that the average recycling net cost cannot be used in determining how changes in our recycling program will affect City costs. The impact of adding or deleting a specific material in the recycling program could be considerably different from the average recycling net cost, depending on the market value of the material at any point in time and the density of the material and hence its processing and collection cost relative to average program and collection costs.

We determined that we would need specific external advice to assist our internal staff committee in managing its efforts to develop a model which would identif and account for the costs of conducting our programs on a full-cost basis under generally accepted accounting principles. In common with many municipalities in Ontario, the new City of Toronto and the seven predecessor municipalities have structured their financial records in a manner which is designed to support the preparation of financial statements and accountability to budgeted estimates that are based on accounting principles prescribed by the Ministry of Municipal Affairs and Housing. While it is important that these needs be met, systems structured to meet only these requirements often fall short of being able to generate consistent information about the costs of programs for two reasons:

(1)all the costs relative to the delivery of each program may not be accounted for in the accounts of the department delivering the program; and

(2)the modified cash basis accounting methodology prescribed by the Ministry of Municipal Affairs and Housing does not include some costs (e.g., consumption of capital assets and some employment related costs) on the full accrual basis needed to completely account for the program delivery cost. A full accrual basis of accounting would be needed in order to compare City of Toronto costs with, for example, comparable private sector program costs.

To address these shortcomings and ensure a high level of accuracy in the costing of programs, a few municipalities have developed Aactivity-based costing@ models and systems for certain key programs. The predecessor municipalities had not yet conformed their accounting practices. This has provided us with additional challenges. Only the Scarborough Public Utilities Commission of the former municipalities had moved to an activity-based costing model to obtain true program costs.

Staff are confident that our internal processes in place to determine the tonnages of recycling materials actually collected and processed give us very accurate information. Other than the tonnages of material sold to the market, however, the information that was not readily available was the generation rates of the various materials that are eligible in our recycling programs. The generation rates are required in order to obtain estimates of the amount of material that is going to landfill in the waste stream and is not being separated at source by our customers.

It was therefore necessary for us to estimate, or use available generation rates for the various materials, such as those provided in the APreliminary Metro 3Rs Strategy Draft Report@ (November 28, 1996), so that we could determine the estimated quantity of each type of eligible recyclable material that is not collected in our current blue box program. The only way for the City of Toronto to obtain better estimates of the amount of material that is in the waste stream that really should be in our recycling program is for us to conduct waste audits on a regular basis. This requires periodically sampling the waste stream and pulling apart garbage bags to gain an insight as to the amount of material ending up in our landfills that should have been recycled.

The Audit Function on this Project:

In order to provide the staff team with appropriate advice, we asked the City Auditor to provide us with the names of three firms capable of assisting the group in our undertaking. It turns out that one of the names put forward is the current auditor for the former Cities of Scarborough and York who is, and will be, completing the audits of accounts for the 1997 fiscal year. Accordingly, we invited Bob Correll of KPMG to assist the team in addressing the costs that should be associated with recycling and landfill programs. Bob Correll is also actively involved with a number of finance-related committees involving municipal officials, and in April, will become the Chair of a task force reviewing the issue of accounting for physical assets by local governments for the Public Sector Accounting and Auditing Board of the Canadian Institute of Chartered Accountants. The auditor will attend the Committee to discuss the advice provided to staff in the development of the costing model and to answer questions that may be raised with respect to the process.

Amount of Recyclable Material ending up in Landfill:

We are often asked how much material that is collected in the blue, grey and green box systems of our recycling program actually does end up in the landfill site. The material known as residue refers to non-marketable materials that were collected in the City=s recycling program yet are ineligible to be sold to the markets. While some of the material is removed at curbside by our collection staff, there are many materials that do end up in our processing facility that should not have been in the system. These ineligible materials that are residual to the process are then transported to the landfill site for disposal. Table 1 below shows the tonnes of residual material that were collected in the City=s recycling program in 1997, but due to their ineligibility for our markets, had to be taken to landfill.

 Table 1

Amounts of Recyclable Materials collected in Blue, Grey and Green Box Program

Actually Recovered and Delivered to Landfill - 1997

 Costs of the Recycling and Landfilling Programs:

When reviewing costs, it is important to bear in mind the difference between our gross expenditure for the program and the net cost which takes into account the current value received for marketable products. As indicated earlier in the report, the market value for recyclable material can fluctuate considerably for some materials, such as aluminum, fibre and plastics. For example, the current price enjoyed by the City for fibre material is locked in at a price considerably above the current market value. When this contract is retendered, there may be significant differences in the revenue received. It is difficult therefore to continue to compare the net costs of our system, and in this report we have attempted to start with gross expenditures and then deduct revenue so that in future we can continue to compare gross expenditures for our programs.

When reviewing both the gross and net costs outlined in this report, it is important that one should not assume that by eliminating any given class of material from collection, the collection costs can be reduced by the specific cost that we have allocated for that class of material. It will still be necessary to collect all of the other materials and a significant component of collection costs relates to the activity of travelling between individual collection points, as well as travelling to and from the yards, transfer stations and material recovery facilities. As identified in our report on deposit/return, significant volumes of recyclable materials have to be excluded from collection in order to reach a threshold which will result in significant cost savings.

It is also necessary to take into account the volume taken up by any element contained in our recycling program, not just the weight component, when considering the impact of adding or deleting materials from eligibility in our program. As can be seen from the revenue from sale of materials, shown in Table 3, aluminum cans are very light yet contributed significantly to our total revenue in 1997. Conversely, materials such as PET contributed a relatively small amount to the total revenue. Revenues from paper fibre amounted to 67 percent of total recycling revenues received in 1997.

Any average cost used, or net cost of our recycling program is merely an average cost of all of the materials taken at one point in time based on the current composition in our system and the current revenue rates for the marketable materials.

Table 2 below shows the 1997 costs of recycling and landfilling compared with the cost for recycling and landfilling published earlier this year. While we do have the breakdown of material of actual tonnages of material collected, processing and sold, we do not have reasonable estimates of the tonnage of each eligible material that goes in the waste stream because it is not separated at source by our customers. We have therefore grouped the materials picked up in our blue box and our grey and green boxes to compare so that the costs of fibre materials and container materials are separated, but the costs of individual container materials are not separated. In effect we have a basket of different materials and to allocate collection, processing and disposal cost per individual material is inappropriate. Any such cost would definitely not represent the incremental cost of deleting this particular material. Table 2 shows that the average net cost of fibre recycling is much lower than the average net cost of container recycling. This is due to the higher density of fibre and its lower collection cost per tonne, and the higher revenue received from fibre as shown below. The costs of recycling and landfilling different types of materials are shown in more detail in Table 4. Landfill costs are shown in Tables 2 and 4 as a uniform cost per tonne. In fact, different materials have different densities in landfill. However, little empirical data is available regarding landfill densities, and no variation in unit cost is shown in the analysis. More work is required to understand the cost of landfilling individual types of recyclable materials.

Table 2

Comparison of Previously Published Recycling and Landfill Costs

and Costs Shown in this Report

 *Residue disposal and Metro administrative costs.

**Excludes cost of waste haul to USA (1997 costs.)

***Includes cost of haul to and disposal of waste in the USA.

Revenue from Sale of Materials:

Table 3 below shows the total revenue received for each eligible recyclable material for the City of Toronto in 1997. It is important to note that the revenue for the recyclable materials can vary considerably from year to year, and in the case of aluminum the City of Toronto obtains quotations every two weeks due to the volatility of the market price for aluminum.

 Table 3

Revenue Received for Recyclable Materials - 1997

Table 4, attached, shows the existing relative costs of recycling and landfilling based on current prices received by the City, which averages a gross cost of $101.63 per tonne for recycling before revenues, $77.70 per tonne after revenues for recycling and $86.00 per tonne for landfill. As can be seen from Table 4, while the average cost of recycling is $77.70 per tonne after revenues, the average cost of fibre recycling is $100.00 per tonne before revenues, $4.55 per tonne after revenues, whereas the average cost of container recycling is $382.35 per tonne before revenues and $264.71 per tonne after revenues. The gross cost of recycling container materials is much higher than the gross cost of recycling fibre materials because the lower density container materials are more expensive to collect and process per tonne of material. There are wide variations in the costs of recycling containers of different material composition. Only aluminum containers result in a net revenue for recycling, while all other containers result in net costs, some of which are very substantial.

Estimates of Quantities of Material in the Recycling and Waste Streams:

The performance of Toronto=s existing recycling program can best be understood by considering the amount of material actually collected in the blue, grey and green box systems, and estimating the amounts of the same material that are not separated out by our customers and are therefore collected as garbage. Based on the City=s data management system, we have fairly accurate tonnages of material that is collected, processed, and sold to markets as a result of weighing all of the material both entering and leaving our system. However, the total quantity of the same types of materials contained in the garbage is an estimate based on waste surveys and other information. Our estimates are based in part on analysis carried out and reported in the Resource Integration Systems Inc. (RIS) study conducted for the Metro Works Department as part of the preliminary Metro 3Rs Strategy. It is easier for us to accurately estimate the larger volumes of materials such as paper and glass than it is the smaller volumes of items such as aluminum cans. However, the accurate estimation of high value materials such as aluminum is important to us in considering future waste management strategies to recover such materials from the waste stream. The quantities of materials described in this report do not include privately collected recyclable material and garbage. All of the figures are based on our existing programs and the impact of a deposit/return system is discussed in a separate report to the Committee.

Summary:

When considering the previously published figures of average recycling and landfill costs mentioned above, it should be noted that the six previous Area Municipalities used different methodologies when reporting their program costs. The differences between these methodologies have been addressed, but future work in bringing all accounting systems to the same basis will result in further refinements of stated unit costs. The previously published costs were also based on 1998 projections and collection volumes for recyclable materials, whereas the revised costs were based on 1997 actual costs and marketed volume of recyclable materials. Future projected changes in recycling and landfill costs are addressed in our separate report dated March 18, 1998, entitled AThe Issues Associated with a Deposit/Return System for Alcoholic and Non-Alcoholic Beverage Containers.@ We found it necessary to engage the services of our external auditor in order to standardize the elements that should be reported as part of cost allocation, and it was through this process that we determined the difference in the original reporting values. Based on the advice given by the auditor, we believe that these figures more accurately represent the costs of our two programs based on 1997 figures. Even though the 1997 expenditures have not been audited, we believe these numbers more accurately reflect the costs of the programs.

As outlined in our report on deposit/return implementation and impacts, there are large amounts of recyclable materials ending up in our landfill due to the fact they are not being separated at source by residents and businesses. The cost of managing and landfilling these materials that should ideally be separated out is considerable, and if through mechanisms such as deposit/return we can extract these materials, then the performance of our waste management system will improve, costs will decrease, and there will be less material going to our landfill site.

Environmental Benefits of Recycling Programs:

The analysis shown in this report indicates that overall net recycling costs are similar to landfill costs. However, these net recycling costs are dependent on fluctuating material prices and the cost of recycling individual materials varies significantly. Due to the large quantity of paper waste in the recycling and garbage waste streams, the price of paper is the most sensitive factor in determining net recycling cost.

This conclusion does not negate the validity of the blue box program. There are significant environmental benefits from recycling, including reduced greenhouse gas emissions, reduced resource use, reduced consumption of landfill space and reduced leachate emissions. The analysis highlights the fact that some individual recycling activities are more expensive than others, and other techniques of waste management such as reduction and reuse may result in improved environmental results, possibly at lower overall costs. A separate report to your Committee addresses this issue, with respect to the concept of deposit/return for alcoholic and non-alcoholic beverage containers.

The analysis also suggests that in considering future waste management strategies for the City, other concepts such as Atwo stream@ collection/processing and centralized composting and mixed waste processing should be addressed in detail, because, even if deposit/return is instituted for alcoholic and non-alcoholic beverage containers, large amounts of eligible recyclable materials (other containers and fibre) will remain in the recycling and garbage stream. These other methods have the potential, possibly in tandem with the blue box program, to capture large amounts of these materials and improve the environmental performance of the City=s waste management system.

This report, together with the report regarding deposit/return, also highlights the issue of needed material recovery facility (MRF) capacity. Decisions regarding expansion of MRF capacity should have regard for potential changes in container processing requirements as a result of institution of deposit/return for alcoholic and non-alcoholic beverage containers and/or mixed waste processing.

Conclusions:

The detailed analysis described in this report has resulted in reassessment of average recycling costs, after revenues from the sale of materials, from $59.00 per tonne to $77.70 per tone. However, the analysis has shown that market prices for materials are a very significant factor in net recycling costs, and that the cost of container recycling (blue box materials) is significantly higher than fibre recycling costs, particularly as a result of current high revenues received for fibre materials.

Assessments of future changes to the City=s waste management system must include detailed analysis of the impacts of changes in collection on processing costs and revenues for the individual materials affected by the changes so that accurate predictions of the expected cost impacts of those changes and the impacts of future market prices can be made. It is also necessary to carry out more analysis to understand the landfill costs for different types of materials. This will assist in gaining a better understanding of the true costs of landfill and a better understanding of the relative costs of recycling and landfill for individual materials.

Contact Name and Telephone Number:

John Warren, Director of Operations and Sanitation

Toronto Community Council Area

Phone: (416) 392-1846; Fax: (416) 392-0396

E-Mail: Ajwarren2@city.toronto.on.ca@

Table 4

 Existing Cost of Recycling and Landfilling

(Based on 1997 Costs and Current Contract for Fibre Recycling)

 *Excluding composting and other diversion, and excluding privately collected, privately delivered wastes and wastes from agencies, boards and commissions.

 **Actual densities of recyclable materials and garbage in landfill will vary. Landfill cost is based on the average density for these materials. More analysis is required to identify the cost of landfill for each material.

 The Works and Utilities Committee reports, for the information of Council, having also had before it during consideration of the foregoing matter the following communications:

(i)(March 16, 1998) from the City Solicitor submitting a confidential report respecting implementation of a deposit/return system for alcoholic and non-alcoholic beverage containers;

(ii)(January 27, 1998) from Mr. John Jackson, Coordinator, Citizens= Network on Waste Management, requesting the opportunity to appear before the Committee regarding deposit/return systems and refillables as components of a new materials management strategy for the City of Toronto; and forwarding a copy of a report entitled AA Strategy to Promote Refillables & Reuse in Ontario@, and a communication to the Minister of Environment and Energy with respect thereto;

(iii)(January 27, 1998) from the Clerk-Treasurer, Township of Hagarty & Richards, advising that the Council for the Township of Hagarty and Richards is requesting endorsement of a resolution dated January 20, 1998, wherein it is resolved that the manufacturers of products placed in containers be required to offer a deposit and refund system for the return of these containers to the place of purchase once empty;

(iv)(March 14, 1998) from Mr. Jeffrey F. Stuart, New York City, forwarding an article from the March 10, 1998 edition of The New York Times respecting the issue of refillable beverage packaging; and

(iv)(March 24, 1998) from Mr. Joseph P. Hruska, Vice President, Municipal Development, Corporations Supporting Recycling (CSR), requesting that if the report dated March 18, 1998, from the Interim Functional Lead for Solid Waste Management is not received for information, the Committee defer consideration of this report until its next meeting.

The following persons appeared before the Committee in connection with the foregoing matter:

-Mr. John Jackson, Coordinator, Citizens= Network on Waste Management;

-Mr. Geoff Rathborne, Vice-President, Market and Technical Development, CSR: Corporations Supporting Recycling; and

-Mr. Anthony G. van Heyningen, Manager, Environmental Affairs, Canadian Soft Drink Association.

(A copy of Figures 1 and 2 referred to in the foregoing report dated March 18, 1998, has been forwarded to all Members of Council with the supplementary agenda for the Works and Utilities Committee meeting of March 25, 1998, and a copy thereof is on file in the office of the City Clerk.)